EXPLANATORY MEMORANDUM
1. CONTEXT OF THE PROPOSAL
In her 2022 State of the European Union Address, Commission President Ursula von der Leyen acknowledged the importance of (...) making it easier for SMEs to do business in the internal market and announced an SME ‘Relief Package’. (...)
The current systems of business taxation in the EU give rise to a significant degree of complexity. (...)
It is thus important that SMEs, which envisage to (...) expand across the border, through PEs, can continue to apply the tax rules that they are familiar with to calculate the taxable result of their PEs in other Member States. This will give these SMEs the opportunity to (...) opt in for the head office taxation rules
In 2005, the European Commission adopted a Communication that (...) presented a ‘Home State Taxation’ system based on the idea of voluntary mutual recognition and acceptance of tax rules by EU Member States. (...) It covered both PEs and subsidiaries and provided for a more complex tax framework, such as consolidated tax base and allocation of the tax base based on objective factors. (...)
The proposed Directive, through its centralised filing, assessment and tax collection procedures and one-stop-shop, is (...) fully in line with the Commission's objective to rationalise and simplify reporting requirements for companies and administration(...)
Information on the tax provisions set out in this Directive should also be made accessible to cross-border users through the Single Digital Gateway (...).
2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY
(...)
3. RESULTS OF STAKEHOLDERS CONSULTATIONS AND IMPACT ASSESSMENT
(...)
4. BUDGETARY IMPLICATIONS
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5. OTHER ELEMENTS
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Article 1 - Subject matter
This Directive lays down rules for computing the taxable result of [PEs] of SMEs which fulfil the criteria set out in Article 2(1) (“Head Office Taxation” rules).
Article 2 - Scope
1. This Directive applies to SMEs which fulfil the following criteria:
(a) they are established under the law of a Member State and take one of the forms listed in Annexes I and II;
(b) they are resident for tax purposes in a Member State (...);
(c) they are subject, directly or at the level of their owners, to a tax on profits listed in Annexes III and IV, or to any other tax with similar characteristics;
(d) they qualify as micro, small and medium-sized (SMEs), as defined in Directive 2013/34/EU; [Commentary: Directive 2013/34/EU qualifies as SMEs "undertakings (...) which on their balance sheet dates do not exceed the limits of [two or more] of the (...) following criteria: balance sheet total: EUR 20 [million]; (b) net turnover: EUR 40 [million]; average number of employees during the financial year: 250.]
(e) they operate in other Member States exclusively through one or more [PEs];
(f) they are not part of a consolidated group for financial accounting purposes (...) and constitute an autonomous enterprise, that fulfils either of the following conditions:
it is not an associated enterprise within the meaning of Article 2(13) of Directive 2013/34/EU;
it is not a linked enterprise within the meaning of Article 3(3) of Commission Recommendation 2003/361/EC.
(...)
[Commentary: Based on Article 2, MNE Groups will not fall in scope of this proposed directive.]